The senior manager of Australia’s tax policy Elinor Kasapadis said that it is important that a business claim everything they are designated. It could be tax-write offs, assets a company purchased, tax refunds, or losses they have had due to the ongoing pandemic. 95% of small business owners consult tax accountants for their taxes. In the current year, it is important to provide necessary information to help the tax advisor to determine whether a business is eligible for tax incentives and deductions related to COVID 19.
If a business has faced difficulties in cash flow or other financial problems, there are many options to recover from those. Businesses can claim a deduction for a bad debt if it is unlikely they can recover any money, but they need to be careful as recovered debts cannot be claimed.
If tax installments are reduced, but a business performs well, a tax bill must be prepared to lodge a return. Until there is a specific exception, government payments designed to help businesses have to be included in analyzed income.
What Can You Claim On Tax?
As per the Australian taxation office, a tax deduction can be claimed on costs incurred in running a business; they can be from the inventory to staff members’ salaries. If expenses play an important role in helping a business earn revenue, then there will be deductions. The deductions depend on the type of business one is running. Cafe owners can claim a Business tax Return on various items such as magazines, subscriptions. Flowers, newspapers, and other things.
If a solar panel is fitted, it should also be counted in tax deductions if the reason was to lessen the energy bill. But taxes on entertainment items are not deductible at all.
Can There Be A Deduction Of Assets?
Yes, there can be deductions on assets due to the Australian government’s temporary full expensing scheme. As per the scheme, there can be immediate tax deductions for businesses on ‘big ticket’ purchases of cheap value, like pieces of equipment. The tax break applies to the first used and installed between 20 October 2020 and 20 June 2022.
If a business earns within $5 billion a year, many assets can be written off. Those assets could be a television, car, boardroom, etc if the aggregated turnover is under $50 million. If an asset was used between 12 march 2020 and the end of the month, one might qualify for the government’s instant asset write-off. One would be able to write off deserving assets of close to $150,000 if a business earns nothing more than $500 million a year.
From a tax planning perspective, it is better if an asset purchase is made before 30 June or the end of the year.
With so many businesses offering promotions, it is the perfect time for businesses to take advantage of instant asset write-off by having capital assets for building a business. There are many items one can write off –
- Motor vehicles such as vans, cars, bikes
- Security items
- Accounting softwares
- Cash registers and sale devices
- Tools, types of equipment
- Fit-outs of office
It is to be kept in mind that a tax break is a generous thing; businesses should bring assets only if they are in a good position. It should be made sure that cash flow is available for funding the purchases or having the capacity to borrow them from a business loan.
Under the government’s SME Loan Guarantee scheme phase two and three initiatives, small-to-medium enterprises could find money easier and cheaper to access. The government guarantees a portion of the loans issued by relevant lenders.
Small Business Tax Tips
When preparing for tax time, one needs to keep in mind these tips-
- Revisiting old stock
The current pandemic might have left one with plenty of stock, most of the stocks can be written down by 30 June, and tax deductions can be claimed from those. One of the things to know is that unsold tax inventory is not a tax deduction but can affect income. If the stock value is greater at the end of the year than at the beginning, then the increased stock is separated in the tax income. But if the stock doesn’t have a good price, then taxable income is reduced, which could mean a deduction.
Businesses whose stock levels and values have gone up and down due to the pandemic need help from experts.
- Leaving bad debts
With many businesses hit hard by the Covid 19 pandemic, there are many debts one cannot recover. Even Though it is unfortunate, one can write off these debts by 30 June and can claim a tax deduction for the debts written off. Deductions are only applicable to debts that were a part of the assessable income in financial years.
- Having a receipt
The Australian taxation office is increasingly hunting expense deductions that are not correct and unreported payments in the year’s business income tax return. One needs to keep a clear record of all transactions that are likely to cause trouble down the road. In terms of proof, both paper and electronic records are accepted, but it needs to be seen that they can be easily retrieved.
Taxes need many records to be kept for at least five years, those records are-
- Expense invoices
- Records of vehicles
- Credit card statements
- Bank statements
- Amount of creditors and debtors
- No asset purchases
- Long term planning
Good tax planning involves having a long-term vision. At the start of every year, business owners need to consult with their tax accountants and get tax affairs sorted for the upcoming year. It could include spreading the business, improving productivity, or exiting the business.
Hire The Best Tax Accountant
It is essential to be educated about tax laws in a country and find ways to help deduct taxes by consulting with a tax accountant in Perth. A business cannot be run if there is a lack of tax planning. There are hundreds and thousands of tax accountants in Perth that can help a business owner understand the various tax laws and how to deduct maximum taxes. A good tax consultant in Perth can help many businesses to know the tax rules and run their business accordingly.